The Pensions Regulator (TPR) has been quick to anticipate concerns of defined benefit trustees and employers alike in the wake of the spread of the coronavirus. It has issued useful guidance for trustees, employers and administrators addressing important points in the following areas:
This brief note summarises the key points of TPR’s approach over the next three months for trustees as they navigate investment and funding risks.
On 27 March 2020, TPR published guidance for trustees of defined benefit schemes on scheme funding and investment in light of Covid-19. Acknowledging the significant challenges for trustees and employers in the current environment, the guidance includes several regulatory easements. In each area, TPR indicates that, while it cannot waive trustees' statutory obligations, it will not take any regulatory action where trustees do not adhere to the strict letter of the law.
The easements in question are as follows:
TPR will allow schemes currently in the process of completing triennial valuations to delay finalising the exercise beyond the 15-month statutory deadline. TPR makes clear that it does not intend to use its power to fine trustees for late submission of valuation documents (including recovery plans) during the coming three months.
TPR will take no action on employers’ failure to pay deficit-repair contributions (DRCs) over the next three months. Noting that many employers are likely to request the suspension or reduction of DRCs, TPR confirms that it expects trustees to consider such requests in light of full information on affordability to the employer and any likely impact on the employer's covenant.
In the absence of clear "covenant visibility" in the short to medium term, TPR expects trustees to offer only short-term concessions of up to three months until more reliable covenant visibility is available. Moreover, trustees should have regard to the steps taken by other creditors when agreeing any concessions.
TPR will take no action in the next three months on any breach of the statutory disclosure requirements if trustees decide to suspend cash equivalent transfer values (CETVs). According to TPR, the Pensions Ombudsman will take TPR’s guidance, and the impact of Covid-19 generally, into account when determining whether trustees acted reasonably in their treatment of CETV requests.
TPR will review these easements as matters progress. It will further consider schemes with valuation dates between 22 September 2012 and 21 September 2020 in its annual funding statement, due to be published after Easter, which will contain further general information for DB schemes.